House prices will continue to slow this year, experts have warned, despite a
slight recovery in values last month.

Average prices rose 0.6 per cent in July to £167,425, according to the latest house price index from Britain’s biggest mortgage lender Halifax.

It brings the annual rate of growth to 4.9 per cent, down from 6.3 per cent the previous month.

Martin Ellis, housing economist, said: “The mixed pattern of monthly rises and falls over the first seven months of the year is consistent with a slowing market. It is also in line with our view that house prices will be broadly unchanged over 2010 as a whole.”

The increase in the number of properties for sale in recent months, boosted by the abolition of Home Information Packs, has eased the pressure that drove up prices last year.

And some economists suggested uncertainty about unemployment levels and the economy would keep the number of buyers low.

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Paul Diggle, property economist at Capital Economics, said: “House prices rose in July, reversing some of the recent falls. But this does not alter our view that prices are set for a period of considerable weakness in the remainder of this year and into 2011.”

“The weakness in buyer activity, signs that credit conditions may be tightening again, the possibility of renewed weakness in the labour market in the next year and the hit on household incomes that the fiscal squeeze will bring over the next few years, will all weigh on house prices.”